Latest Search
Quote
| Back Zoom + Zoom - | ||||
|
<Research>JPM: NWD Default Will Have Greater Impact Than CHINA VANKE From Broader Sector Perspective
Recommend 35 Positive 44 Negative 30 |
||||
|
||||
|
JPMorgan wrote in its report that the recent liquidity issues of CHINA VANKE (02202.HK) and NEW WORLD DEV (00017.HK) have once again sparked market concerns, triggering seismic fluctuations in their bond prices. From a broader sector perspective, JPMorgan believed that a default by NEW WORLD DEV would produce a greater impact because CHINA VANKE might be considered as one of the last to fall among Chinese developers, whereas NEW WORLD DEV could open a Pandora's box for the Hong Kong real estate sector. Lacking of concrete evidence that showed an easing of liquidity constraints, JPMorgan gave both stocks an Underweight rating. Regarding the impact on Chinese banks, as CHINA VANKE accounts for only about 0.1% of total Chinese bank loans (or 1.6% of total Chinese developer loans), if the company defaults, JPMorgan estimated that the NPL formation ratio for Chinese banks would increase by 10-30 bps. However, the impact on earnings would be limited because of high bank provisioning rates. Consequently, the broker viewed any pull-back as an opportunity to add holdings in quality Chinese banks, such as CM BANK (03968.HK). As for Hong Kong banks, JPMorgan expected them to bear some expected credit loss (ECL) related to NEW WORLD DEV's risk exposure. All Hong Kong banks under the broker's coverage were major partner banks of NEW WORLD DEV, except DAHSING BANKING (02356.HK). The broker continued to favor HSBC HOLDINGS (00005.HK) and STANCHART (02888.HK) over Hong Kong banks. JPMorgan also mentioned that HANG SENG BANK (00011.HK) may face greater downside risk given higher earnings risk and a relatively higher valuation compared to peers. AAStocks Financial News |
||||
Copied to Clipboard
 |
||||
